Broker snap: Things to get worse at FirstGroup, says Charles Stanley

23rd May 2012 09:37

Charles Stanley has left its hold recommendation and 250p target price in place for transport firm FirstGroup after its full-year results this morning.The broker says that the 4% revenue growth and 1% fall in adjusted pre-tax profits were in line with expectations. FirstGroup also said it is to shake up its UK bus operations to focus on those areas that offer the greatest potential for growth."Our view: Tim O'Toole's first full year in charge hasn't been inspiring, with earnings slipping a little, though return on capital looks to have been a respectable 8-9%," said analyst Douglas McNeill."Trouble is, this year is going to be worse, not better, as surgery is performed on the UK bus division; our FY13 forecasts are likely to stay where they are," he said.The stock has returned over 5% this month but is down 38% in the year-to date. Shares are trading on just under seven times rolling prospective consensus earnings, the broker said.Shares were trading 5.47% higher at 216.1p in early trading on Wednesday.BC